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By Chijioke Ohuocha
ABUJA, March 27 (Reuters) - Nigerian bond yields fell slightly on Wednesday, a day after the central bank unexpectedly announced an interest rate cut aimed at stimulating growth in Africa’s biggest economy, traders said.
Nigeria’s central bank cut its benchmark interest rate by 50 basis points to 13.5 percent on Tuesday, its first reduction in four years. The rate has been held at 14 percent since July 2016 to support the naira and curb inflation.
Bond yields dropped to around 13 percent across maturities on Wednesday on minor buying interest, traders said. They later recovered to 14.15 percent. The most liquid one-year treasury yield fell 15 basis points to 12.75 percent.
“The markets opened lower but no one is buying as investors adjust their bids,” one trader said.
Traders said low liquidity on the interbank market hampered deals, adding yields have already fallen from as high as 15 percent last month after the central bank lowered the rates at which it sold treasuries at its last auction.
Banking sector credit doubled to 80 billion naira on Tuesday from the previous day but the amount of maturities due to be repaid between now and August is not sufficient to boost liquidity, traders said.
President Muhammadu Buhari last month defeated his pro-market rival Atiku Abubakar, winning re-election on a pledge to revive the economy, which has faced low growth since emerging from its first recession in 25 years in 2017.
With election uncertainty out of the way, bond buyers expect the central bank could start to increase liquidity to improve funding conditions.
The central bank expects the country to lift growth to between 2.7 and 3 percent this year, up from 1.9 percent last year, the governor said during Tuesday’s rate decision.
The stock market, which is beset with worries over low growth, dropped 0.5 percent on Wednesday as brokers say the rate cut was too little to stimulate the economy. (Reporting by Chijioke Ohuocha Editing by Alexandra Hudson)